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26.01.2005 Business & Finance

Govt asked to adopt policies to deepen market

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Accra, Jan 26, GNA - Professor Edward Ghartey, Senior Fellow of the Institute of Economic Affairs, on Wednesday stressed the need for proactive government policies to deepen the financial market by encouraging wider participation for increase in activities of the securities market.

He said the current ability of market players to predict and forecast future interest rates meant that the securities market in the country was shallow and less active.

"Slope coefficients explain the yield curves, and the insignificance of the intercept terms only confirm that the Expectation Theory (ET) exists in Ghana and is further supported by the forecasting ability of the ET. This means that the securities market in Ghana is shallow and less active," he explained.

Professor Ghartey was speaking on the topic: "Monetary Policy on Ghana's Term Structure of Interest Rates: Effects and Implications," at a policy forum organized by the Institute of Economic Affairs (IEA). The forum was to discuss, among others the effect of monetary policy since the Bank of Ghana officially adopted the inflation targeting and monetary policy committee framework and compare its outcome with previous monetary policy regimes in the country.

He said current examination of the economy showed that monetary policy being pursued by the BOG was effective.

However, Prof. Ghartey said there was a need for the improvement of communication infrastructure in the country to enhance the BOG attempt to make its policy transparent.

He also suggested the adoption of financial innovations to reduce the spread in the country, saying that the existence of varied instruments would enable investors to seek where to invest their money.

Prof Ghartey said the low rate of inflation in the economy at this time could be maintained if government did not finance its deficit by printing money.

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